It’s far past time that we stopped tolerating billionaires paying no taxes. Despite out-of-control growth in billionaire wealth over the last several years, many of the richest people in America still pay lower tax rates than many working Americans.
Trust in American institutions is lower than ever, and the American people are looking for lawmakers to show that they’re serious about un-rigging a system that gives special treatment to the wealthy. The Billionaire Minimum Income Tax, proposed by President Biden in his latest budget and now introduced as legislation by Reps. Steve Cohen (D-Tenn.) and Don Beyer (D-Va.) would do precisely that.
The Billionaire Minimum Income Tax would implement a 20 percent minimum tax on the nation’s wealthiest taxpayers, requiring households worth over $100 million to pay at least 20 percent in taxes on their full income, including realized and unrealized gains. If Congress is serious about ensuring the wealthiest Americans no longer avoid paying their fair share, this piece of legislation is a no-brainer.
Unlike those who work for a living, most wealthy individuals have their wealth contained in assets like stock or real estate and don’t need a salary. That means they are only taxed if they decide to sell their assets, at which point any capital gains would be recognized and taxed. But the ultra-wealthy don’t need to sell their assets to generate billions of dollars in untaxed income. Billionaires can take out special low-interest loans with their assets as collateral. That money works just like any kind of income, but it isn’t taxed like it. Since the loans are not considered income, billionaires can reap the growing value of their assets without ever triggering a tax bill.
Families can continue to avoid taxes forever by using this ‘buy, borrow, die’ strategy: holding onto their assets without selling, borrowing against them for income and using the loophole at inheritance that allows billionaires to pass on the increased value of their assets to heirs tax-free.
As a result, many ultra-billionaires end up paying a lower tax rate than average working and middle-class taxpayers. A series of leaks has shown us that the top 0.001 percent of wealthiest Americans pay somewhere around 17 percent of their income in taxes, while the average single worker earning $45,000 per year pays 21 percent and the average married couple with one child earning $200,000 per year pays 26 percent.
Sometimes their tax bills are flat-out zero. For several years, billionaires like Jeff Bezos, Elon Musk and George Soros have avoided paying any federal income tax at all.
We’re bombarded with news about how little the rich pay in taxes so often that it becomes less shocking over time, but there is no overstating the depth of this injustice. If you bought a candy bar at a gas station and paid five cents in sales tax, you paid more in taxes for that candy bar than the richest men in the world paid in income tax over entire years in which they were making billions of dollars. Something in our tax code is deeply, fundamentally broken.
Thankfully, at least some of our lawmakers are serious about fixing it. The Billionaires Minimum Income Tax is a simple solution to this problem of freeloading billionaires, and it would affect only the truly ultra-wealthy.
This isn’t about punishing wealth; it’s about ensuring everyone is playing by the same set of rules. Ordinary Americans pay taxes on their income on every paycheck, and a 20 percent minimum tax is lower than the top tax rate for a single person earning $45,000 of income. The kind of billionaires that buy yachts that are like Russian nesting dolls with smaller yachts inside of supersized ones, or the ones that can buy up an entire Hawaiian island, can clearly afford to pay at least that much.
There’s a reason a moderate like Joe Biden is fighting for this change — it’s both good policy and good politics. Commonsense tax reform like the Billionaire Minimum Income Tax would make our tax code dramatically fairer, and in the context of a Senate that seems unwilling to spend without a corresponding pay-for, raising hundreds of billions of dollars from billionaires would allow the Biden administration to make record-breaking investments in public amenities and welfare programs.
But that’s not all — it would also give the Democratic Party a major, popular policy win that proves they’re serious about standing up for working Americans, something the party desperately needs in a difficult midterm environment.
Taxes can be complicated, but this isn’t. Every billionaire should be paying taxes at the end of each year just like other Americans. It’s high past time that we ended this special carveout for a small number of elite Americans and made everyone, no matter their wealth, play by the same rules.
Morris Pearl is a former managing director at Blackrock, Inc., the chair of the Patriotic Millionaires, and co-author of “Tax the Rich! How Lies, Loopholes, and Lobbyists Make the Rich Even Richer.”